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Weak Comps Predicted for June

Cool weather and flagging confidence are seen hurting June sales results.

Hot Topic in the Westfield Topanga shopping center in Woodland Hills, Calif.

June same-store sales results, released today, are expected to be more of the same — weak.

With the weather cool, consumer confidence shaky and unemployment rising, analysts anticipate June will increase pressure on retailers during the second quarter. As they struggle against consumer frugality and compete with the stimulus-bolstered results of a year ago, there could be even greater temptation to impose deeper markdowns to build back-to-school business and limit inventory exposure.

“We believe June should be another, at best, poor month, where the best most retailers will be able to point to will be easing comparisons going forward, and that results were not as bad as the holiday season,” said retail analyst Eric Beder of Brean Murray, Carret & Co.

Although Beder acknowledged warmer weather in the last week of June spurred shoppers to come out, the positive effects were reduced. Most retailers already had become more aggressive in discounting as the month progressed to offset the clearance nature of the period.

Late Wednesday, teen retailers Zumiez Inc. and Hot Topic Inc. reported comp declines of 19.3 percent and 7.9 percent, respectively. Torrid, Hot Topic’s plus-size concept, saw its comps fall 10.3 percent, and comps slid 7.2 percent at the namesake chain.

Analysts were forecasting a 6.1 percent dip at Hot Topic and a 19.6 percent decline at Zumiez, said Jennifer Black of Jennifer Black & Associates.

Looking beyond June, Black said even though comparisons are likely to get easier, she anticipates most retailers will post negative comps through the fourth quarter of 2009.

Black said this “will be a year, in our opinion, that will go down in the record books as seeing the highest unemployment, record numbers of foreclosures and bankruptcies and large amounts of personal debt.”

As the consumer continues to seek out value, retailers will “evolve and change and be more targeted via the Internet through social networking sites,” and “less focused on billboards and other types of advertising,” she said.

Until then, Pali Capital retail analyst Amy Noblin said retailers would continue “cutting controllable costs, curbing footage growth and operating lean inventory levels, while waiting for the consumer to bounce back.”

“It will be awhile before shoppers return to their previous purchasing habits, if at all,” she said.

But some were slightly more optimistic. Previewing results on Tuesday on a conference call, Stifel Nicolaus & Co. softlines analyst Richard Jaffe said although June will “likely be more challenging than we thought,” inventories are lean, which should limit clearance sales volume.

“A cautious look to June [and] a very defensively positioned retail sector give us some hope for second-half improvement in the trend, and maybe the consumer frustration — a little bit of pent-up demand — could help drive things,” he said.

Despite the muted expectations, the S&P Retail Index was up 6.11 points, or 2 percent, to 310.34 on Wednesday. The Dow Jones Industrial Average reversed earlier declines to finish ahead 14.81 points, or 0.2 percent, at 8,178.41, but the S&P 500 just missed a gain for the session, finishing down 1.47 points, or 0.2 percent, at 879.56.

Late in the day, Eddie Bauer Holdings Inc., which filed for Chapter 11 bankruptcy protection on June 17, said the U.S. bankruptcy court in Delaware had approved its $100 million debtor-in-possession facility with Bank of America, GE Capital Corp. and CIT Group/Business Credit Inc. CCMP Capital Advisors LLC is the stalking-horse bidder to acquire Eddie Bauer for about $202 million in cash.